Do banks charge 10 % TDS on interest income on income above Rs 10,000 or on the entire interest income?

Anurag has recently started investing in fixed deposits. Anurag is unsure whether any TDS will be deducted from his fixed deposits – the interest on which may exceed Rs 10,000 in the financial year. Anurag wants to know if banks charge 10 percent TDS on interest income on income above Rs 10,000 or on the entire interest income?

TDS is deducted by banks on the total interest income. Let’s understand in detail.

TDS becomes applicable when your interest income exceeds Rs 10,000 from all your deposits. The Bank will sum up your deposits, including those that are held in its branches. If the sum of these exceeds Rs 10,000 the bank will deduct TDS on your total interest income.

Here are some examples –

Case 1 – Assuming Anurag holds 2 fixed deposits with XY Bank. If his interest income from one of Fixed Deposit in XY Bank is Rs 5000 and from another fixed deposit with the same bank is Rs 3000. Since total interest income is less than Rs 10,000, no tax is deducted.

Case 2 – However, if Anurag’s interest income is Rs 8000 from one fixed deposit and another fixed deposit with the same bank earns you Rs 5000 interest, his total interest income as per records of XY Bank is Rs 13,000. The bank will deduct TDS @10% from his interest income. This TDS shall be Rs 1300. (Do remember to submit PAN details or the Bank will deduct TDS @ 20%)

Do note that in both the cases the entire interest income is taxable for Anurag and should be added under the head ‘income from other sources’ in your Return.

Anurag can take credit of TDS already deducted (case 2 above) -this TDS deducted can be adjusted against his final tax liability based on his total income.

If Anurag files his return with ClearTax we can automatically pull out all his TDS details directly from the income tax department in the tax return, he will not miss taking credit of these TDS entries.

If you have any questions, do write to us support@cleartax.in and we’ll be happy to assist you!

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